By: Natalie Bremmer

United States relations with Russia have never been the best, but Russian threats and advancements into Ukrainian territory have put extreme tensions on the minor singular ounce of stability that was once present.

In the following months, pre-to-current invasion, the U.S. worked tirelessly amongst themselves and in collaboration with other countries to impose a variety of sanctions on Russia in an effort to slow this ruthless attack.

Check out the timeline of events below to get up-to-date on what has been going on with Russia.

February

The first, most notable event in this timeline of sanctions started on February 21, 2022, where, within pro-Russian Donetskaya Narodnaya Respublika (DNR) and Luhanskaya Narodnaya Respublika (LNR) regions of Ukraine, new investments, trade, and financing from U.S. personnel to this region had been stopped; the reason being that there were Russian forces already in these areas and the Russian government kept spreading false information of Ukrainian aggression towards them.

Not even three days later, on February 24, 2022, Russia publicly invaded Ukraine. Within this same day, the U.S. passed a series of sanctions including:

• Freezing several Russian banks and rejecting any future transactions; VTB Banks and Public Joint Stock Company Sberbank of Russia to name a few
• Putting financial limitations on several Russian elites, oligarchs, and private entities
• Limitations or complete bans on roughly 24 Belarusian people and entities; most banks, defense, and security suppliers, and defense officials
• Restrictions on the export of semiconductors, computers, lasers, and other technologies to Russia

Two days later, on February 26, 2022, the United States, European Union, United Kingdom, Japan, Canada, France, Italy, and Germany all imposed a sanction removing select Russian banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) program to limit their access to reserves. In addition to this, they also aimed to stop key Russian entities from getting citizenship in other countries to avoid already imposed sanctions.

March

March consisted of a flurry of several more sanctions. One of the most notable ones was banning the importation of Russian oil, coal, and liquified natural gas which was announced on March 8, 2022.

Other relevant sanctions included travel bans going into Russia, banning transactions between the different businesses within the defense, marine, aerospace, and electronics sectors in Russia and Belarus to United States entities, restricting more than 300 high-class and powerful Russian figures, and solidifying financial sanctions against Russia that were already put in place in addition to some new ones.

During this same month, the United States, European Union, United Kingdom, Japan, Canada, France, Italy, and Germany reconvened in two separate meetings to announce increased import tariffs on Russia, eliminating their World Trade Organization membership benefits, and denying them access to World Bank and International Monetary Fund (IMF) to eliminate their borrowing capabilities.

April

Sanctions introduced in April  further separated Russia from the most profitable sectors within the U.S., including:

• Russian darknet and ransomware entities; Hydra and Garantex
• Alrosa, the largest Russian diamond mining company
• Banning Russian and Russian-affiliated vessels from entering U.S. waters
• Russian virtual currency mining companies; Transkapitalbank, Bitriver, Tsargrad, and more
• Temporary denial orders towards Russian aircraft carriers Aeroflot, Azur Air, and UTair for evading previous sanctions

However, one of the most notable events during this month was the two laws President Biden passed on April 8, 2022.

The first, named “Ending Importation of Russian Oil Act”, bans the importation of any energy-related products classified under Chapter 27 of the Harmonized Tariff Schedule from the Russian Federation. This law also strictly prohibits investments in anything that would aid Russia in the takeover of Ukraine.

It is, however, written into this law that the acting president would be able to lift this ban after 90 days of submitting a certification to Congress.

The second law, titled “Suspending Normal Trade Relations with Russia and Belarus Act”, removed both Russia and Belarus from the ‘Normal Trade Relations’ – Column 1 – of the Harmonized Trade Schedule and placed them in Column 2 with much higher rates than Normal Trade Relation countries.

The majority of the written portion of this law was explaining their reasoning for the column shift; essentially how the United States and Ukraine are both members of the World Trade Organization (WTO), how Russia was also part of the World Trade Organization at the beginning of the invasion, and then how not only did Russia’s invasion into Ukraine, denied Ukrainians of their right to independence and sovereignty but also continues to threaten international relations and hampers Ukraine’s ability to participate in the World Trade Organization. Since Belarus has been providing very public support to Russia during this time, they were also moved to Column 2.

On January 1, 2024, Russia and Belarus are scheduled to be reclassified under Column 1 and once again receive Normal Trade Relations treatment.

Similar to the first law, the president can submit a proclamation to move both Russia and Belarus back to Column 1 rates which would take place 90 days after the submission date and would last no longer than one year. 

May

The passing of sanctions in May slowed significantly compared to March and April, but a few notable events took place regardless.

On May 8, 2022, the Leaders of The Group of Seven – United States, United Kingdom, Japan, Canada, France, Italy, and Germany – gathered in Berlin with the president of Ukraine and agreed on five more key elements to put into effect as new or improved sanctions to cripple the Russian war effort.

The biggest driving point was a permanent phasing out of dependence on Russian energy, including oil.

The other decrees included:

• continuing with sanctions against Russian banks
• banning the export of key services to Russia that could help with war efforts
• fight Russian propaganda by limiting the revenue private companies can transfer to Russia and their affiliates, and
• continue with sanctions against the extremely wealthy and all of their family members that support President Putin in this conflict

On May 9, 2022, more strict restrictions were added to existing sanctions (enacted on March 3, 2022) on American exported goods – mostly wood products and construction machinery – that were originally meant to slow down Russia’s oil production but were slightly repurposed to stop the replenishment of war materials.

On the same day, the tariffs on Ukrainian steel that were put in place by ex-President Trump were temporarily lifted for one year.

Closer to the end of the month, May 24, 2022, the U.S. Treasury blocks Russian entities from paying debts back to bondholders or, in more generous cases, increased interest by as much as 50% from their original totals.

June

June consisted mostly of fine-tuning sanctions that were already imposed in prior months.

June 2, 2022, was quite an eventful day– including adding 71 more entities to the sanction list which included mostly ‘military end-users,’ freezing more assets stored around the globe of wealthy and influential Russian individuals, and adding more export controls to limit items used for Russian military purposes, and further explaining U.S. export controls to allies with a readout by Deputy Secretary Don Graves in Belgium.

Later on June 15, 2022, the U.S. government targeted a Russian extremist group self-titled the Russian Imperial Movement (RIM), formerly classified as a terrorist group in April of 2020, and significantly limited their ability to move funds by sanctioning their two most prominent leaders.

The rest of that month consisted of more Temporary Denial Orders on airlines that continued to violate travel sanctions, addressing evasion attempts on Russian and Belarusian fronts to skirt around financial sanctions, and creating even stricter access to companies attempting to export military supplies and other technologies to Russia.

To learn more about the sanctions imposed on Russia and how that could affect your business, contact GVSU's Van Andel Global Trade Center and sign up for our 5th Annual Summer Summit taking place on August 3, 2022, at the GVSU Alumni House.

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Natalie Bremmer is a Student Assistant at   GVSU’s Van Andel Global Trade Center . She is a Junior currently pursuing undergraduate degrees in Finance and Human Resource Management at Grand Valley State University. She enjoys lifting weights, getting lost in a good video game, spending time with friends, and going on long hikes.

by Natalie Bremmer 

Big news rocked the trading world recently with the announcement of the monthly goods and services trading deficit dropping a staggering 19.1% for the United States.

April 2022’s numbers were just released on June 7th, 2022 stating that the $107.7 billion trade deficit from March 2022 had dropped by $20.6 billion down to $87.1 billion in April 2022.

More specifically, U.S. April exports were $252.6 billion, roughly $8.5 billion more than March, and about a 3.5% increase between those two months. U.S. April imports were $339.7 billion, which is a $12.1 billion or 3.4% decrease from the previous month of March.

Year-To-Date

Though April was a great month, in the big picture the United States is still feeling the effects of the Covid-19 pandemic. Between April 2021 and April 2022, the goods and services deficit increased by 41.1% totaling $107.9 billion.  This is essentially due to exports increasing by 18.8%, coming in at $151.3 billion, and imports simultaneously increasing by 24.3%, totaling $259.2 billion within this timeframe.

Three Month Trends

On a more positive note, the U.S. three-month trade deficit average is starting to look a lot more promising. Between February 2022 and April 2022, the average goods and services deficit fell by $0.3 billion, down to a total of $94.3 billion. During this time period, U.S. exports increased by $8.3 billion for a total of $242.2 billion, and imports increased by a marginal $8.0 billion totaling $337.4 billion.

Monthly Export Trends

In April 2022, the U.S. export of goods increased by a substantial $6.1 billion to a total of $176.1 billion. The largest portions of this increase came from industrial supplies as well as food and animal feed, accounting for about $4.5 billion combined. Another large portion of the increase was due to the export of capital goods– namely civilian aircraft.

During the same month, the U.S. export of goods also increased by roughly $2.4 billion, totaling at $76.5 billion. The main categories that caused this increase were travel and transport which increased by $1.5 and $0.3 billion respectively.

Monthly Import Trends

In April 2022, U.S. imports of goods actually decreased in comparison to the prior month by $13.0 billion, with a sum of $283.8 billion for the month.

Some of the largest contributors to this decrease were consumer goods, industrial supplies, and capital goods which all decreased by $6.3, $5.4, and $2.6 billion respectively. However, U.S. imports of automotive vehicles rose by roughly $1.4 billion.

Alternatively, the import of services during the same month increased by $0.9 billion compared to the month prior, capping out at $55.9 billion. The largest contributors to this increase were travel, with a $0.6 billion dollar increase, and other business services at $0.2 billion.

For the full report, you can find the U.S. Census post here.

Keep up with VAGTC’s Trading Thoughts Blog for additional updates covering the trade deficit information released in July.

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Natalie Bremmer is a Student Assistant at   GVSU’s Van Andel Global Trade Center . She is a Junior currently pursuing undergraduate degrees in Finance and Human Resource Management at Grand Valley State University. She enjoys lifting weights, getting lost in a good video game, spending time with friends, and going on long hikes.

by Natalie Bremmer

Michigan Economic Development Corporation's MI-STEP

The Michigan Economic Development Corporation (MEDC) oversees Michigan’s State Trade Expansion Program (MI-STEP) to give financial assistance to small businesses to pursue exporting their products and gain access to larger global markets.

They have roughly $2.667 million worth of aid to give out to small businesses across the state. Up to 75% of pre-approved exporting expenses can be covered with a $15,000 maximum per business in a fiscal year when the Michigan company follows the MI-STEP eligibility criteria.

This program makes entering or expanding in new global markets viable for small or medium-sized businesses eager to expand while accommodating a more limited budget.

MI-STEP may seem confusing at first glance, so here are its three main objectives:

• Increase amount of small and medium-sized businesses in Michigan that participate in exporting
• Grow the dollar value of Michigan exports
• Provide an avenue for Michigan small businesses to explore new trade opportunities

The eligibility criteria to secure aid from this program include:

1. Being in accordance with SBA standards
2. Demonstrate understanding of export costs and business with foreign markets; including freight forwarding, packing, shipping, and customs brokers
3. Show potential for successful exporting as well as a positive impact on the regional economy
4. Provide an EIN number that is linked to a Michigan address
5. Must be in good standing with the Michigan Department of Treasury as well as any other regulatory agencies
6. Must be a U.S. company that is prepared to export goods of U.S. origin with a minimum of 51% U.S. content

Once a business gets this aid, there are particular transactions that will be covered by MI-STEP funds. These include but are not limited to:

• Participating in foreign-trade missions
• E-commerce fees for advertisement and website design
• Participation in international trade shows
• Foreign sales trips (up to two people on an economy flight)
• EXIM export credit insurance premiums
• Participation in export training workshops

One company that benefitted greatly from an MI-STEP award was Armor Protective Packaging: a rust removal company that specializes in making clean, safe, and easily used vapor corrosion inhibitor packaging. Through MI-STEP, they were able to expand to provide to 90% of the Fortune 500’s industrial companies as well as several other countries across the world. More specifically, MI-STEP helped this company with having the funds to create a local website translated and customized for the different languages and cultures of the specific countries they were selling to– effectively expanding their digital footprint. They were also able to travel to some of these countries to network and secure international business partners which was another huge step for them to reach their global markets.

GVSU's Van Andel Global Trade Center

The Van Andel Global Trade Center is an easily accessible resource with various export training programs and workshops that are eligible for MI-STEP coverage that teaches small businesses how to find success similar to how Armor Protective Packaging did. VAGTC’s incredibly knowledgeable team has been working with businesses across Michigan for over two decades in both one-on-one and group settings– entirely depending on their clients' needs. Throughout their time at GVSU they’ve worked with over 10,000 companies and have assisted more than 31,000 business professionals. Not only do they have a wealth of experience with exporting, but they also assist companies of all sizes with importing concerns.

VAGTC consults with companies in the following areas:

• Exporting/Importing
• Export & Import Procedure Manuals
• Compliance (export and import)
• Free Trade Agreements such as USMCA
• Global Supply Chain Logistics
• Export Controls Training: ITAR & EAR
• Cultural Training
• Market Research
• Foreign-Trade Zones
• Global Risk Factors
• Harmonized Schedule/Classifications, Export Control Classification Numbers
• and more!

Their website has a variety of helpful resources like guidebooks, available programs, trade zones, and Worldwide Credit Reports. VAGTC memberships are also available for discounts on workshops and more individualized assistance.

With an ever-expanding global market, there has been no better time to enter it than right now. Check out MEDC's MI-STEP website with full details on the program and begin taking full advantage of all that MEDC has to offer! Companies can also learn more about VAGTC’s services and how we can get you connected to the MI-STEP program by contacting us today! Now is the time to grow your small business through increased export sales, let us help!!

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About the Author

Natalie Bremmer is a Student Assistant at  GVSU’s Van Andel Global Trade Center . She is a sophomore currently pursuing an undergraduate degree in Finance and Human Resource Management at Grand Valley State University. She enjoys lifting weights, playing video games, spending time with friends, and going on long hikes.

What is the Harmonized System (HS) and the HS Classification?

The Harmonized System (HS) is a globally recognized way to identify goods being imported and exported by assigning a standardized classification. The HS classification is used for declaring goods at the time of export in export declarations and for the purpose of filing customs entries at the time of import in the country of destination. The HS classification is used to determine duty rates and collect duties, taxes, and fees for the imported products.

The Harmonized System (HS) is something every importing and export company will need to understand so proper HS classifications can be assigned to their products. Companies need to take great care in assigning HS classification and understand the compliance risks associated with their HS classification decisions.  Exporters and importers alike have a legal responsibility to properly claim and classify goods/products.

The Harmonized System (HS) Breakdown

The Harmonized System (HS) is a very structured classification system made up of sections, chapters, notes, headings, and subheadings.

The United States has two published versions of the Harmonized System (HS).  For imports, the U.S. publishes the Harmonized Tariff Schedule (HTS) of the U.S. for the HS classification of imported products and the assignment of duty rates.  For exports, the U.S. publishes the Schedule B for export HS classifications and the collection of statistical data.

The Harmonized System (HS) is broken down into 22 sections which act as groupings of similar chapters.

There are 97 chapters of products that are organized from least manufactured to more manufactured and logically group classifications by make or by use. The first two digits of each HS classification are the chapter number. Within each chapter, the Harmonized System (HS) provides a four-digit heading with the primary legal definition of what is to be included in that heading.  Those headings are further broken down into six-digit subheadings. The heading and subheading legal definitions are universal and all countries agree to use the same legal definitions.

While the globally recognized headings and subheadings remain constant, each country can further break down the subheadings with country-specific suffixes. In the U.S. two digits (digit 7 and 8) are added as the duty rate suffix and two digits (digit 9 and 10) are added as a statistical suffix – making the U.S. classification a 10-digit number.
See the photo above for an example using Coffee.

Why is HS Classification Important for your Business?

First of all, for importers, the HTS classification determines the duty rates and the duties paid at the time of import so it has immediate revenue implications. Non-compliance can result in fines, penalties, and the back payment of additional duties owed.

Paying duties is a non-negotiable, so proper classification can reduce your compliance risk in the short and long run. The result will never be good when using the wrong classification. If your misclassification caused you to overpay in duties, you won’t receive a refund. If you are underpaid in duties, you are required to pay the difference, and customs will decide if you will need to pay interest, and whether or not fines and penalties will be imposed.

For exporting, HS classification is used in:

• Export documentation (ex. Commercial Invoice)
• Export Declaration
• Import customs entry in a country of destination

For importing, HS classification is used in:

• Customs and Border Protection (CBP) for customs clearance and entry

All in all, use the HS classification to your advantage. Generate proper classifications and importing and exporting will be smooth sailing.

Are You Interested in Learning More? 

GVSU's Van Andel Global Trade Center offers a yearly Fundamentals of Harmonized System (HS) Classification Training. Check out our Events page to register for this upcoming event!

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About the Contributor

Jenna Hoover is working as a student assistant for GVSU’s Van Andel Global Trade Center. She is a junior at GVSU currently studying Finance and Supply Chain Management within the Seidman College of Business. You can find her visiting local coffee shops as she studies for classes or checks in on her Roth IRA. In her free time, she enjoys walking her dog, Gertrude, and hanging out with friends along the beautiful beaches of West Michigan.